Need for Stricter Auditing

The Financial Supervisory Service (FSS) unveiled that one listed firm had an average of 7.8 subsidiary companies last year, up 0.4 from the previous fiscal year.
The Financial Supervisory Service (FSS) unveiled that one listed firm had an average of 7.8 subsidiary companies last year, up 0.4 from the previous fiscal year.

 

The Financial Supervisory Service (FSS) announced on July 27 that the number of the subsidiary companies of the 1,327 listed South Korean corporations that have a fiscal year ending in December and announced their consolidated financial statements for the fiscal year of 2015 increased by 11.1% from a year earlier to 10,327. The subsidiary company mentioned here is defined as one in which a certain enterprise is its largest shareholder owning more than 50% of its shares or exerting a substantial influence.

According to the FSS, one listed corporation had an average of 7.8 subsidiary companies last year, up 0.4 from the previous fiscal year. Those located abroad totaled 6,330, 61.3% of the total. The percentage increased by 10% from a year ago. 

The FSS explained that the increase in the number of overseas subsidiaries can be attributed to overseas investment expansion. When it comes to the top 100 corporations in terms of consolidated total assets, 49.7% (1,584) and 27.2% (865) of their overseas subsidiaries were found in Asian countries and the Americas, respectively.

The holding company of the Hanwha Group had a total of 290 subsidiary companies during the period. It was followed by SK (277) and POSCO (239).

“With the number of such overseas subsidiaries on the rise, the risk of inaccurate financial information and data could be rising with it in a case where the countries where they are located are lax in accounting oversight,” the FSS explained, adding, “Accounting firms need to beef up their auditing in view of accounting oversight and economic conditions by country.”

 

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